The sell orders are densely packed, and trading volume is shrinking. Beneath a chart that seems to be hitting new highs lies a classic crash signal that sends chills down the spines of veteran players.
On the chart at dawn, the ZEC price climbed to the previous high of $457, but the volume histogram on the 4-hour chart looked like a deflated balloon, forming a textbook 'volume-price divergence'.
Meanwhile, the on-chain data analysis platform Arkham released a report claiming that 53% of ZEC transactions have been labeled, linking up to $42 billion in activities to identifiable entities. This is no different from pulling the rug out from under Zcash, which is based on 'privacy'.
01 Technical Alerts
The market language has issued multiple warnings. While ZEC's price has reached a recent high, trading volume has significantly shrunk, a state of divergence between price and volume that is typically a precursor to the exhaustion of upward momentum in technical analysis.
What is even more alarming is the momentum indicators. The weekly relative strength index of Zcash once reached a historical extreme of 94.24, far exceeding the overbought line of 70.
This extreme overbought state often ends with a sharp correction in history. According to historical data, after entering the overbought zone, ZEC may maintain an upward trend for several weeks, but subsequently experience declines of 45% to over 90% multiple times.
02 Core Bearish: 'Transparent' Privacy Coins
The most fundamental shock currently comes from the undermining of its core narrative. Arkham's report shows that not only are over half of the transactions traceable, but even 37% of ZEC balances (valued at approximately $2.5 billion) have been tagged to specific entities.
A landmark case in the report is a ZEC asset seized by the U.S. government during the AlphaBay investigation eight years ago, which has doubled in value and is under continuous monitoring. This sends a clear signal to the market: even so-called 'privacy transactions' may have their barriers penetrated.
For ZEC, which positions 'privacy' as its highest value proposition, this is undoubtedly a fundamental trust crisis. It's like a warrior claiming to be invisible, suddenly found covered in reflective strips.
03 Contradictory Signals: ETF Hopes vs. Regulatory Realities
Amid market concerns, there exists a contradictory perspective. Grayscale has submitted an application to the U.S. SEC in November to convert its Zcash trust into a spot ZEC ETF.
Some institutional investors, such as Cypherpunk Technologies and Winklevoss Capital, are indeed increasing their holdings of ZEC, viewing it as a compliant privacy option.
However, the regulatory attitude remains severe. The SEC has always been strict in its scrutiny of privacy coins. Arkham's tracking report has just been released, which may provide more reasons for regulatory opposition to ETFs, exacerbating the already uncertain approval process.
04 Historical Mirror: The Cycle of the Doomsday Vehicle
History does not simply repeat itself, but always carries similar rhymes. ZEC has a disturbing nickname in the cryptocurrency market - 'The Doomsday Vehicle'.
Looking back in history, ZEC surged to $703.75 in January 2018, only to plummet 93% in the following year. In May 2021, it again dropped 92% from a peak of $386. After both peaks of ZEC, Bitcoin entered a prolonged bear market lasting 1-2 years.
The logic behind this phenomenon is that when mainstream narratives (such as DeFi and new public chains) are exhausted, funds will flow into the most marginal and obscure sectors (such as privacy coins). This is often seen as a sign of capital exhaustion at the end of a bull market rather than a discovery of new value.
05 Dancing on the Edge of a Cliff and a Steady Harbor
Faced with the current high uncertainty and accumulating risks surrounding ZEC, seeking a 'safe haven' for funds has become a natural choice for rational investors. At this time, turning attention to assets built around stability and transparency is indeed a wise strategy.
For example, fully over-collateralized decentralized stablecoins provide a completely different perspective. Each issuance of these stablecoins corresponds to high-quality on-chain assets that are pledged at a value exceeding 100%.
Price Stability Module (PSM) and other innovative mechanisms allow for zero-slippage exchanges with mainstream stablecoins, thereby anchoring value. More importantly, all collateral is stored in publicly verifiable smart contracts, allowing anyone to review in real-time, achieving maximum transparency.
In a volatile market, the significance of these assets lies not only in preserving value but also in converting stablecoins into 'yield-generating assets' through mechanisms like smart allocators, providing the possibility for funds to continue growing while waiting for market opportunities.
The market frenzy will eventually subside, like a tsunami retreating, leaving behind not the highest and most dazzling waves, but the most solid and stable rocks.
